The Bank of Canada announced that its overnight rate will continue to hold at the effective lower bound of .25%.
All 20 of the economists on Finder.com’s BoC Interest Rate Forecast panel had correctly predicted this.
And every single economist, with the exception of one, believes the rate will hold for longer than a year (95%), compared to 81% in Finder.com’s July BoC report.
As well, three quarters of the panel (15 of 20) don’t see the rate moving until some point in 2022 or 2023, nearly double the percentage points of the June BoC report when just 40% of experts believed the rate would hold until 2022.
As for the economic outlook, Finder.com reports that despite Canada’s inflation rate only rising by .1% in July and remaining under 1% year over year, just over a quarter (26%) of the panel expect The Bank to employ negative rates or any other unconventional policies.
Derek Holt, vice-president and head of Capital Markets Economics at Scotiabank explained: “The BoC has ruled out negative rates and narrowed its QE focus to buying Federal government bonds … this will continue to provide ongoing stimulus absent further moves.”
Moshe Lander, Economics Professor at Concordia University, disagreed, explaining: “The Bank will need to pursue aggressively any and all policies to stave off deflation and to give a boost to demand to keep the economy from seizing up if and when the second wave comes in autumn.
When asked about the transition away from CERB at the end of September to a more targeted set of benefits only half (50%) of the economists believed it would be sufficient for those negatively impacted financially by the pandemic.
Avery Shenfeld, managing director and chief economist at CIBC Capital Markets, believes this move will be positive for workers, stating “while base benefits are a bit lower than they were under CERB, there are more opportunities to earn labour income while retaining these benefits.”
However, Sebastien Lavoie, Chief Economist at Laurentian Bank, said he wasn’t sure.
Lavoie noted that “smaller checks from the federal government could slow the pace of the recovery… More income support from governments…is a small price to pay in the grander scheme of things.”
For Finder.com’s full report, go to https://www.finder.com/ca/bank-of-canada-interest-rate-forecast.